High Court upholds Tribunal's decision on Rule 8(3A) unconstitutionality

The Bombay High Court dismissed the appeal challenging the Customs, Excise and Service Tax Appellate Tribunal's decision on the unconstitutionality of Rule 8(3A) of the Central Excise Rules, 2002. The Court held that the Tribunal was bound to follow the declarations of unconstitutionality made by the High Courts of Gujarat, Madras, and Punjab & Haryana. As a result, the appeal was rejected, affirming the Tribunal's decision in favor of the Respondent based on the invalidity of Rule 8(3A).

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Issues:
Appeal challenging order under Section 35G of the Central Excise Act, 1944; Questions of law regarding Tribunal's decision on Rule 8(3A) of Central Excise Rules, 2002 and Cenvat credit denial; Constitutionality of Rule 8(3A) based on judgments from High Courts of Gujarat, Madras, and Punjab & Haryana; Tribunal's obligation to follow declaration of unconstitutionality by a Court.

Analysis:
The appeal before the Bombay High Court under Section 35G of the Central Excise Act, 1944 contested the order issued by the Customs, Excise and Service Tax Appellate Tribunal (Tribunal) on 27th January, 2016. The primary issues raised by the Revenue for consideration were related to the Tribunal's decision on the case's merit concerning the contravention of Rule 8(3A) of the Central Excise Rules, 2002, and the denial of Cenvat credit under Rule 8(3A) of Cenvat Credit Rules, 2004. The proceedings against the Respondents were initiated based on the violation of Rule 8(3A) of the Central Excise Rules, 2002, which the Tribunal's order noted had been declared unconstitutional by the High Courts of Gujarat, Madras, and Punjab & Haryana in separate judgments.

The Tribunal's decision to allow the Respondent's appeal was based on the unconstitutionality of Rule 8(3A) of the Central Excise Rules, 2002, as determined by the aforementioned High Court judgments. The High Court emphasized the principle that when a provision is declared unconstitutional by a Court, the Tribunal is obligated to follow that declaration, as established in previous cases. The Court cited precedents where the Tribunal had to adhere to the decisions of High Courts declaring specific provisions as ultra vires, making them non-existent in the eyes of the law. The Court highlighted the importance of following the decisions of competent Courts unless a contrary decision is provided, underscoring the binding nature of such judgments on the Tribunal.

In light of the above legal principles and precedents, the High Court concluded that the questions posed did not present substantial legal issues. Consequently, the appeal was dismissed, affirming the Tribunal's decision to allow the Respondent's appeal due to the unconstitutionality of Rule 8(3A) of the Central Excise Rules, 2002 as determined by the High Courts of Gujarat, Madras, and Punjab & Haryana.

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